Trade Facilitation

Journal of
WORLD TRADE
Law & Business
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Edwin Vermulst
Partner Vermulst, Verhaeghe Graafsma & Bronckers, Brussels, Belgium
Associate Editors Petros C. Mavroidis Edwin B. Parker Professor of Law at Columbia Law School,
New York, Professor of Law at the University of Neuchatel & CEPR
Thomas Cottier Professor of European and International Economic Law, Managing
Director World Trade Institute, University of Berne, Switzerland
Simon Evenett University of St.Gallen
Bernard Hoekman Development Research Group, The World Bank
Junji Nakagawa Professor, University of Tokyo, Tokyo, Japan
Yong-Shik Lee Director and Professorial Fellow, The Law and Development Institute
Faizel Ismail Head of the South African Delegation to the WTO, Geneva
Gary N. Horlick Law Offices of Gary N. Horlick
Henrik Horn Senior Research Fellow, Research Institute of Industrial Economics
(IFN), Stockholm
Pierre Sauv: World Trade Institute, University of Berne
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ISSN 1011-6702
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Trade Facilitation: A Conceptual Review
Andrew GRAINGER
With falling tariff levels, it is probably not surprising that the non-tariff area and trade facilitation, in
particular, are receiving growing attention. Apart from the World Trade Organization (WTO), trade
facilitation is a subject of substance within a wide range of international organizations including several
United Nations (UN)-type bodies, the World Customs Organization (WCO) as well as those concerned
with economic development, supply chain security, and sector-specific issues such as international transport
and logistics. The resulting body of international trade facilitation instruments and initiatives, which include
conventions as well as detailed technical recommendations, is extensive. This article provides a general review
of key elements and topics that are associated with trade facilitation and sets them against underlying
challenges and obstacles in practice as well as for research. While much of the current effort in trade
facilitation begins with a top-down premise whereby governments seek to implement international
conventions and recommendations nationally the author argues that trade facilitation is inherently an
operations-focused topic and deserves to be approached from a bottom-up approach, too. Such approach not
only provides a strong case for an interdisciplinary research agenda, it also brings into question whether
current institutions concerned with trade facilitation have the necessary capabilities to apply themselves to the
more operational aspects associated with international trade.
1. INTRODUCTION
The last few decades have witnessed an exponential growth in trade and a considerable
reduction in tariff levels. It is probably a natural progression for trade negotiations to now
refocus their efforts on the non-tariff area. In this context, trade facilitation has come to
particular prominence at the World Trade Organization (WTO) where it was first
formally raised at the 1996 ministerial meeting in Singapore. While associated Singapore
issues such as transparency in government procurement, trade and investment, and com-
petition policy have been dropped, trade facilitation remains a strong agenda item with
considerable momentum. This can be observed within the Doha trade round
1
and also in
ongoing aid-for-trade and trade facilitation-specific capacity building programmes,
2
Eco-
nomic Partnership Agreements, as well as in the area of supply chain security and border
Andrew Grainger is a Lecturer at Nottingham University Business School. He is also the Founding Director of
Trade Facilitation Consulting Ltd. In previous positions, he served as Deputy Director at SITPRO, the former UK trade
facilitation agency, as well as Secretary for EUROPRO, the umbrella body for European trade facilitation organizations.
His PhD thesis with the title Trade Facilitation and Supply Chain Management: A Case Study at the Interface between
Business and Government was awarded by Palgrave Macmillan the first prize for best PhD thesis 20052008 in Maritime
Economics and Logistics. He can be contacted at <andrew.grainger@nottingham.ac.uk>.
1
For example, World Trade Organization (WTO), WTO Negotiations on Trade Facilitation: Compilation of
Members Textual Proposals (Negotiating Group on Trade Facilitation, WTO, 2009), TN/TF/W/43/Rev.19.
2
World Trade Organization/Organisation for Economic Co-operation and Development (WTO/OECD), Doha
Development Agenda Trade Capacity Building Database (TCBDB) (WTO/OECD, 2010).
Grainger, Andrew. Trade Facilitation: A Conceptual Review. Journal of World Trade 45, no. 1 (2011):
3962
management reform where trade facilitation is seen as a vehicle to overhaul existing control
regimes for the benefit of both government and business stakeholders.
Of course, the concept of trade facilitation is nothing new. Right from the onset, the
General Agreement on Trade and Tariffs (GATT), in the preamble, made explicit reference
to its ambitions for the other, non-tariff barriers to trade.
3
Further back in time, keen
observers of history are likely to find plenty of examples by which traders and governing
officials seek to simplify trade operations. For example, it was not uncommon for market
towns in Europe to display applicable weights and measures publicly. In the event of
any dispute, trading parties could quickly verify their own weights against those on
public display.
The topic of trade facilitation is very much focused on the operational aspects of
international trade and as such differs somewhat from the more economic flavoured
discussions associated with trade tariffs traditionally seen to be at the heart of trade
negotiations. More specifically, trade facilitation looks at the quality of the trade environ-
ment and how it impacts on efficient trade operations. Brian Staples adeptly describes trade
facilitation as the plumbing of international trade.
4
Apart from the relatively recent
pressures stemming from international trade negotiations, there are several systemic factors
underlying todays case for trade facilitation.
For example, border agencies such as customs, immigration, phytosanitary, and
quarantine inspectors, among many others are faced with the operational challenge of
having to accommodate exponential growth in trade volumes with only a finite amount of
control resources (such as manpower and facilities) at their disposal. Traditional frontier
checks, visually symbolized by the boom barrier, seem outdated and inefficient when
tackling such escalating trade volumes. Trade facilitation, in this context, is about being
able to apply controls more effectively without disrupting trade flows and freeing up
enforcement resources to focus on clandestine border movements.
Similarly, there is growing political pressure to accommodate tighter security within
trade operations. Especially in response to 9/11, some policy circles perceive the supply
chain to be a particularly open and vulnerable system for misuse by terrorist and criminals.
5
Emerging control regimes that are being developed to address these vulnerabilities make
explicit reference to trade facilitation.
6
They recognize (either explicitly or implicitly) that
trade facilitation and collaborative control arrangements with business stakeholders, which
need to be suitably incentivized, are necessary for a tighter control regime that is not just
limited to border checks alone and expands across the entire supply chain.
7
3
GATT, the General Agreement on Tariffs and Trade (WTO, 1947).
4
B.R. Staples, Chapter 16 Trade Facilitation: Improving the Invisible Infrastructure, in Development, Trade, and
the WTO: A Handbook, ed. B. Hoekman, A. Mattoo & P. English (Washington: World Bank, 2002), 139148.
5
For example, S.E. Flynn, America the Vulnerable, Foreign Affairs 81, no. 1 (2002): 6074.
6
For example, World Customs Organization (WCO), WCO SAFE Framework of Standards (Brussels: WCO,
2007).
7
A. Grainger, Supply Chain Security: Adding to a Complex Operational and Institutional Environment, World
Customs Journal 1, no. 2 (2007a): 1729; Kommerskollegium, Supply Chain Security Initiatives: A Trade Facilitation Perspective
(Stockholm: Kommerskollegium (National Board of Trade), 2008).
JOURNAL OF WORLD TRADE 40
Then, there is also the national competitiveness argument. It holds that in a world
characterized by a globalized production structure
8
and competition on a global scale,
9
any
domestic-driven bureaucratic red tape applied by government executives will place business
stakeholders at a disadvantage. In contrast, where a government succeeds in reducing the
compliance burden upon its business community, their international competitiveness is
seen to be well served.
10
In this context, trade facilitation is also closely associated with
development aid and trade capacity building programmes and has recently enjoyed a
considerable increase in funding, too.
11
The trade compliance burden, which the concept of trade facilitation seeks to over-
come, tends to have multiple facets but usually relates to the direct costs of submitting
information to the authorities (such as to Customs) as well as the indirect or subsequent
costs resulting from time delays and missed business opportunities.
12
This article provides a
conceptual review, outlining the scope of trade facilitation, its goals, elements, and prin-
ciples set against practitioner experience and the current literature. This article aims to
inform debate and stimulate much needed academic enquiry while providing a high-level
introduction to this very current and pressing topic.
2. TRADE FACILITATION DEFINITIONS AND RECOMMENDATIONS
While there is no one single definition for trade facilitation, the WTO, in a training note
on its website, once prominently defined trade facilitation as: The simplification and
harmonisation of international trade procedures where trade procedures are the activities,
practices and formalities involved in collecting, presenting, communicating and processing
data required for the movement of goods in international trade.
13
Many trade facilitation
proponents also make reference to the procedures applicable for making payments (e.g., via
commercial banks). This is emphasized, for example, in the United Nations Centre for
Trade Facilitation and Electronic Business (UN/CEFACT) definition where trade facilita-
tion is viewed as the simplification, standardization and harmonisation of procedures and
associated information flows required to move goods from seller to buyer and to make
payment.
14
8
For example, as described by P. Dicken, Global Shift: Reshaping the Global Economic Map in the 21st Century
(London: Sage Publications, 2003).
9
For example, T. Levitt, The Globalization of Markets, Harvard Business Review 61, no. 3 (1983): 92; C.K.
Prahalad & Y. Doz, The Dynamics of Global Competition (New York: Free Press, 1986).
10
For example, World Bank, Doing Business Trading across Borders, <www.doingbusiness.org/
ExploreTopics/TradingAcrossBorders/>, 10 Apr. 2010a; World Bank, Logistics Performance Index (LPI),
<www.worldbank.org/lpi>, 13 Apr. 2010b.
11
For example, reported aid for the most narrowly defined trade facilitation projects has increased from USD 100
million in 2001 to USD 392 million in 2006 (WTO/OECD).
12
Organisation for Economic Co-operation and Development (OECD), Business Benefits of Trade Facilitation.
Working Party of the Trade Committee (Paris: OECD, 2001), TD/TC/WP(2001), 21; Organisation for Economic Co-
operation and Development (OECD), Quantitative Assessment of the Benefits of Trade Facilitation, Working Party of the Trade
Committee (Paris: OECD, 2003), TD/TC/WP(2003)31/Final.
13
WTO, 1998.
14
Organisation for Economic Co-operation and Development (OECD), supra n. 12, 2001.
TRADE FACILITATION: A CONCEPTUAL REVIEW 41
As such, trade facilitation looks at how procedures and controls governing the move-
ment of goods across national borders can be improved to reduce associated cost burdens
and maximize efficiency while safeguarding legitimate regulatory objectives.
15
The mod-
ernization of trade and customs procedures and administrative practices in particular
through use of information and communication technology (sometimes referred to as
ICT) is often a key element in addition to the simplification, standardization, and
harmonization objectives.
16
However, for many practitioners, trade facilitation is simply
about reducing the volume and impact of red tape a term traditionally associated with
wasteful and time-consuming bureaucracy found in international trade operations. It is
not uncommon for trade facilitation proponents to also be concerned about other opera-
tional frustrations that plague efficient international logistics operations, such as the quality
of transport infrastructure (i.e., transport facilitation) and corruption.
As outlined, there are multiple drivers pushing the trade facilitation agenda forward.
These include the operational pressures faced by border inspection staff in an environment
of escalating trade volumes, political pressures to tighten up supply chain security, demands
for improved business competitiveness, and international pressures that have placed trade
facilitation into mainstream trade policy. Subsequently, a multiple of international organi-
zations are applying themselves to the topic. These include, among others, the WTO, the
World Customs Organization (WCO), the UN/CEFACT, the International Civil Avia-
tion Organization (ICAO), the International Air Transport Association (IATA), the Inter-
national Maritime Organization (IMO), the International Chamber of Commerce (ICO),
as well as a multitude of international business interest and sector-specific institutions.
In addition, organizations like the World Bank, the United Nations Conference on Trade
and Development (UNCTAD), the Organisation for Economic Co-operation and Devel-
opment (OECD), as well as regional bodies, such as United Nations Economic and Social
Commission for Asia and the Pacific (UNESCAP) and Asia-Pacific Economic Cooperation
(APEC), have actively contributed to the international trade facilitation agenda. Much of
their intellectual output is accessible via the Global Facilitation Partnership for Transporta-
tion and Trade portal (www.gfptt.org).
17
The formalized recommendations produced by these international bodies extend from
standards about the layout of paper documents,
18
electronic messaging standards between
15
I originally penned this particular definition while writing up my PhD thesis (A. Grainger, Trade Facilitation and
Supply Chain Management: A Case Study at the Interface between Business and Government (London, Birkbeck: University of
London, 2007b)). In April 2006, I also used this definition for an entry on Trade Facilitation in Wikipedia which
Google suggests has been copied extensively.
16
For example, the recent overhaul of EU customs legislation was initially driven by modernization objectives
(e.g., A. Grainger, Trade Facilitation and Import-Export Procedures in the EU, Briefing Paper, European Parliaments
Committee on International Trade (Brussels: European Parliament, 2008b); TAXUD/477/2004).
17
A web portal developed and maintained by a range of core partners, including a multitude of UN bodies, the
World Bank, and the WCO.
18
For example, United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), Recom-
mendation No. 1: United Nations Layout Key for Trade Documents (Geneva: United Nations, 1981). ECE/TRADE/352, 37.
electronic trade systems (e.g., the UN/CEFACTs Electronic Data Interchange Standard
EDIFACT) to the harmonization of customs procedures and legislation (e.g., the WCOs
Kyoto Customs Convention or the WCOs Harmonized System for tariff classification).
Other examples of international initiatives include UNCTADs open source software
developments for electronic customs systems (ASYCUDA) or IATAs electronic freight
initiative,
19
which seeks to radically cut the paperwork and modernize the electronic
systems used by airlines and airports in international air-cargo operations. Noteworthy
are also those recommendations that have institutional reform ambitions, such as UN/
CEFACTs specific recommendation for the creation of national trade facilitation bodies
the so-called PRO (for PROcedures) committees
20
or that aim to radically overhaul
national electronic trade infrastructure and the interface between government agencies and
traders, such as through the implementation of a Single Window system.
21
Then, there are also the GATT Articles V, VIII, and X addressing the Freedom of
Transit, Fees and Formalities, and Publication and Administration of Trade Regulations.
They lie at the heart of current WTO deliberations on trade facilitation. While much is still
under negotiation, Member States proposals include a long catalogue of measures safe-
guarding: the publication of applicable rules and procedures (e.g., via the internet); advance
notification of any changes to rules and procedures; and the establishment of enquiry
points. Member States proposals also extend to the details concerning: the application of
trade procedures, such as the use of advance rulings (e.g., for tariff classifications); efficient
appeal mechanisms; the preferential treatment of trusted or authorized traders; and the
modernization of the trade and customs infrastructure. The commitment to ongoing
review and consultation with business stakeholders appears to be a further theme, among
many others, that have been raised in WTO discussions.
22
Figure 1 summarizes some of the key international initiatives, recommendations, and
legal instruments commonly associated with trade facilitation. The table expands on a
helpful compendium produced by UN/CEFACT and UNCTAD,
23
tying in further
analysis produced by Andrew Grainger.
24
19
S. Smith & M. Moosberger, IATA e-Freight: Taking the Paper out of Air Cargo, in The Global Enabling Trade
Report 2009, ed. R.Z. Lawrence, M.D. Hanouz, Qin He & J. Moavenzadeh (Geneva: World Economic Forum, 2009).
20
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), Recommendation No. 4
National Trade Facilitation Bodies CEFACT (Geneva: UN, 1974), ECE/TRADE/352; United Nations Conference on
Trade and Development (UNCTAD), Trade Facilitation Handbook Part One National Facilitation Bodies: Lessons
from Experience (2006b), UNCTAD/SDTE/TLB/2005/1.
21
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), Recommendation No. 33:
Single Window Recommendation (Geneva: UN, 2004), ECE/TRADE/352, 37.
22
World Trade Organization (WTO), supra n. 1, 2009.
23
United Nations Centre for Trade Facilitation and Electronic Business and United Nations Conference on Trade
and Development (UN/CEFACT and UNCTAD), Compendium of Trade Facilitation Recommendations (UN/CEFACT,
UN, 2002), ECE/TRADE/279.
24
Grainger, supra n. 15, 2007b.
Figure 1. International Trade Facilitation Recommendations and Instruments (Adapted from UN/
CEFACT and UNCTAD and Grainger)
25
International Trade Facilitation Recommendations and Instruments
World Trade Organisation (WTO)
Trade Facilitation Specific Articles: GATT Article V (freedom of transit), GATT Article VIII
(fees and formalities) and GATT Article X (publication and administration of trade
regul ations)
Customs Valuation: GATT Article VII (technical interpretati on covered by the WCO)
WTO Agreement on Rules of Origin (technical interpretation of non-preferential rules of
ori gin covered by the WCO)
World Customs Organisation (WCO)
Kyoto Convention for Harmonising Customs Procedures; WCO Harmonised Commodi ty Code
Descriptions and Coding System (HS System); Framework of Standards to Secure and
Facilitate Global Trade (SAFE);
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT)
Rec. N1: United Nations Layout Key for Trade Documents; Rec. N. 2: Locati ons of Codes in
Trade Documents; Rec. N. 3: Code for the Representation of Names of Countri es; Rec. N.
4: National Trade Facilitation Bodi es; Rec. N. 5: Abbreviations of INCOTERMS; Rec. N. 6:
Aligned Invoice Layout Key for International Trade; Rec. N. 7: Numerical Representation of
Dates, Time and Periods of Time; Rec. N. 8: Unique Identifi cation Code Methodology UNIC;
Rec. N. 9: Alphabetic Code for the Representation of Currencies; Rec. N. 10: Codes for the
identi fication of Shi ps; Rec. N. 11: Documentary Aspects of the Transport of Dangerous
Goods; Rec. N. 12: Measures to Facilitate Maritime Transport Documents Procedures; Rec.
N. 13: Facilitation of Identified Legal Problems in Import Cl earance Procedures; Rec. N. 14:
Authentication of Trade Documents by Means Other than Signature; Rec. N. 15: Simpl er
Shipping Marks; Rec. N. 16: LOCODE - Code for Trade and Transport Locations; Rec. N. 17:
PAYTERMS - Abbreviations for Terms of Payment; Rec. N. 18: Facilitation Measures Related
to International Trade Procedures; Rec. N. 19: Code for Modes of Transport; Rec. N. 20:
Codes for Units of Measure Used in International Trade; Rec. N. 21: Codes for Passengers,
Types of Cargo, Packages and Packaging Materials; Rec. N. 22: Layout Key for Standard
Consignment Instructions; Rec. N. 23: Freight Cost Code FCC; Rec. N. 24: Trade and
Transport Status Codes; Rec. N. 25: Use of the UN Electronic Data Interchange for
Administrati on, Commerce and Transport Standard (UN/EDIFACT); Rec. N. 26: The
Commercial Use of Interchange Agreements for El ectroni c Data Interchange; Rec. N. 27:
Preshi pment Inspection; Rec. N. 28: Codes for Types of Means of Transport; Rec. N. 31:
Electronic Commerce Agreement; Rec. N. 32: E-Commerce Self-Regulatory Instruments
(Codes of Conduct); Rec. N. 33: Single Window Recommendation
United Nations Conference on Trade and Development (UNCTAD)
ASYCUDA: an open source off-the-shelf computerised customs management system used
in more than 70 countries (http://www.asycuda.org)
ICAO and IATA (Air)
IATA e-freight initiative; ICAO Convention on International Civi l Aviation (Annex 9: Trade
Facilitation); know shipper/known consignor concept
International Maritime Organisation (IMO)
Convention on Facilitation of International Maritime Traffic (FAL); Safety of Life at Sea
Convention (SOLAS); International Ship and Port Facility Security Code (ISPS-Code)
Other International Organisations
UNECE: Working Party 7 looking after agriculture quality standards; UNECE and IRU: TIR
(Road Transit) Convention; ISO: countl ess product and qual ity standards; ICC: Incoterms
(standardised trading terms used in international trade); ICC: Uniform Customs and Practices
for Letters of Credit (UCP); ICS: Standard [shipping] Manifest Report and
Recommendati on; ICS: Standard Format of Bills of Lading

25
United Nations Centre for Trade Facilitation and Electronic Business and United Nations Conference on Trade
and Development (UN/CEFACT and UNCTAD), supra n. 23; Grainger, supra n. 7, 2007a; Grainger, supra n. 15 2007b;
A. Grainger, Trade Facilitation: A Review (Working Paper) (Trade Facilitation Consulting Ltd, 2007c).
3. TRADE FACILITATIONS ELEMENTS AND TOPICS
To a large extent, the elements and topics associated with trade facilitation can be derived
from the international recommendations just outlined. They are also strongly echoed
within the Member States proposals to the WTO
26
but can be found in other multilateral,
bilateral, or regional documents, too.
27
Unfortunately, although a number of the interna-
tional organizations have produced handbook or reader-type publications,
28
very little
analysis has been produced to introduce the elements and topics associated with trade
facilitation to the wider academic literature in any structured manner.
The following paragraphs attempt to catalogue the range of key topics into four
interdependent elements that constitute the current focus in trade facilitation. This frame-
work builds on earlier work,
29
with a selection of illustrative examples to help place the
listed trade facilitation topics into context. The four interdependent elements that define
trade facilitation are: (1) the simplification and harmonization of applicable rules and
procedures; (2) the modernization of trade compliance systems, in particular the sharing
of information and lodgement of declarations between business and government stake-
holders; (3) the administration and management of trade and customs procedures; and
(4) the institutional mechanisms to safeguard the effective implementation of trade facil-
itation principles and the ongoing commitment to reform.
3.1. THE SIMPLIFICATION AND HARMONIZATION OF APPLICABLE
RULES AND PROCEDURES
The key objective here is to reduce the degree of complexity associated with trade and
customs procedures. Work in this area often concerns itself with the actual draft of
applicable texts (or negotiations concerning the draft of texts). Topical themes include:
(a) the harmonization of rules and procedures, (b) the avoidance of duplication, and
(c) the accommodation of business practices and ensuring that rules and procedures are
operable.
26
WTO, 2009.
27
Asia-Pacific Economic Cooperation (APEC), APEC Principles on Trade Facilitation, Meeting of APEC
Ministers Responsible for Trade (MRT) (Shanghai, 67 Jun. 2001); World Customs Organization (WCO), supra n. 6,
2007.
28
United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), Trade Facilitation
Handbook for the Greater Mekong Subregion (Bangkok: UN, 2002), ST/ESCAP/2224; UNECE (ed.), Trade Facilitation:
The Challenges for Growth and Development (Geneva: United Nations, 2003); L. D. Wulf & J. B. Sokol (eds), Customs
Modernization Handbook (Washington: World Bank, 2005); V. Mathur (ed.), Reforming the Regulatory Procedures for Import
and Export: Guide for Practitioners (Washington: World Bank Group, 2006); T. Ujiie & ADB, Trade Facilitation, ERD
Working Paper Series, no. 78 (Manila, Philippines: Asian Development Bank, 2006); United Nations Conference on
Trade and Development (UNCTAD), Trade Facilitation Handbook Part II: Technical Notes on Essential Trade
Facilitation Measures (2006a), UNCTAD/SDTE/TLB/2005/2; United Nations Conference on Trade and Develop-
ment (UNCTAD), supra n. 20, 2006b.
29
Grainger, supra n. 15, 2007b; Grainger, supra n. 25, 2007c.
3.1.1. The Harmonization of Rules and Procedures
The harmonization of trade and customs procedures with international norms and con-
ventions ensures a degree of uniformity, consistency, familiarity, and compatibility between
trading nations. Examples include the WCOs Kyoto Customs Convention, the UN
Recommendations on the Transport of Dangerous Goods, the TIR (Transports Interna-
tionaux Routiers (International Road Transport) [Transit] Convention, among many
more. At the national level, harmonization also enables consistency in the application of
controls between different executive agencies. For example, in many countries non-
customs procedures such as the collection of trade statistics, the collection of value-
added tax, the enforcement of phytosanitary measures, or marketing standards are placed
under the umbrella of Customs executive powers, thus enabling a more coordinated level
of control. However, in order to be effective such practice usually requires extensive
changes to governing legislation. Without such changes, control regimes are often not
compatible.
3.1.2. The Avoidance of Duplication
At the international level, this trade facilitation theme often concerns itself with establishing
joint ownership for controls. For executive enforcement agencies, this may relate to
instruments that enable bilateral or international investigations, or provide a framework
for sharing administrative and control responsibilities. Topics might include negotiations
about formally recognizing: one countrys export controls (or part of) in lieu of the other
countrys import controls; or one countrys certification regime (e.g., in the area of
security, origin, or veterinary and phytosanitary measures) so that controls do not need
to be repeated in full upon import.
At the national level, examples might include the coordinating efforts (be it formal or
informal) between government agencies to enforce controls collaboratively
30
and share
resources such as staff and inspection facilities. Efforts may also extend to the formal or
informal recognition of those controls conducted by private sector stakeholders irrespective
of any official control specifications, for example, those applied in the context of quality
control or commercial due diligence.
3.1.3. Accommodate Business Practices
Again, there are many examples, which include the acceptance of commercial documents,
such as the commercial invoice or the shipping manifest, in lieu of official documents.
The so-called simplified procedures that allow compliance operations to be performed in a
more conducive manner for example, inland clearance (away from the ports) or periodic
declarations rather than on a consignment by consignment basis feature strongly, too.
30
Sometimes referred to as the the one-stop-shop concept.
Another objective is to ensure that enforced procedures are operable. It is not
uncommon for legislatively set rules and procedures to be incompatible with local opera-
tional practices. For example, a procedure that mandates the port operator to deliver goods
to a customs inspection facility will only work in an environment where the port operator
has control over the use of cargo handling equipment; at many ports, such as Roll-On/
Roll-Off (RO/RO) and ferry ports, this may not be the case. A degree of flexibility and
supporting institutional mechanisms to make rules and procedures fit for purpose is often
required.
3.2. THE MODERNIZATION OF TRADE COMPLIANCE SYSTEMS
Much of the work here is focused on speeding up the submission and processing of trade
and customs declarations operations, especially through use of modern information tech-
nology. Associated topics tend to focus on: (a) the recommendation of solutions; (b) the
development of enabling standards; and (c) the sharing of experiences.
3.2.1. Solutions
One specific solution dominating the trade facilitation agenda is the Single Window
concept, which can be defined as a facility that allows parties involved in trade and transport
to lodge standardized information and documents with a single entry point to fulfil all
import, export, and transit-related regulatory requirements.
31
As such, it radically stream-
lines the interface between business and government stakeholders, yielding extensive
operational benefits, efficiency gains, and cost-savings.
32
Other propagated solutions range from so-called Port Inventory Systems (enabling
information handling at speeds that are comparable or faster than the port operators
physical handling capabilities) to electronic customs systems (speeding up and automating
much of the customs administrations processing activities) and information portals (ensur-
ing that traders and operators always have access to the most up-to-date information).
Noteworthy is that some of the current trade facilitation-motivated modernization projects,
especially those with regional ambitions such as the European Union (EU) electronic
customs initiative (TAXUD/477/2004) or Association of Southeast Asian Nations
(ASEANs) commitment to interoperable single window systems,
33
are very ambitious
with total implementation costs likely to be in the order of hundreds of millions of dollars.
31
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), supra n. 21, 2004, 37.
32
H.-H. Teo et al., Organizational Transformation Using Electronic Data Interchange: The Case of TradeNet in
Singapore, Journal of Management Information Systems 13, no. 4 (1997): 139; L.D. Wulf, Tradenet in Ghana: Best Practice
of the Use of Information Technology, Background Paper Prepared for the World Development Report 2005 (World
Bank, 2004); United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), supra n. 15, 2005;
World Customs Organization (WCO), Single Window-WCO Information Sheets on Key Trade Facilitation Measures (Brussels:
WCO, 2008).
33
ASEAN, Agreement to Establish and Implement the ASEAN Single Window, Kuala Lumpur, 9 December
2005, <www.aseansec.org/18005.htm>, 15 Apr. 2010.
3.2.2. Standardization
Standardization-type activities are particularly well established within trade facilitation
circles, especially at organizations like UN/CEFACT or the WCO. The work is primarily
motivated by the desire to reduce transaction costs that might arise from incompatible
electronic data messages, that is, the protocols and formats used to communicate informa-
tion between computer systems. Work often also involves reaching international agree-
ments on the types of data necessary to control trade
34
as well as on how specific
information should be coded (e.g., airports are universally described by reference to three
letters
35
and goods are described by reference to the WCOs Harmonized System).
Other work traditionally associated with trade facilitation is the standardization of
paper documents and their format.
36
Compliance ensures familiarity and consistency
irrespective of location, language, or control regime; it also reduces the risk of making
mistakes and enables software developers to market commercial off-the-shelf trade docu-
ment management solutions.
3.2.3. Sharing of Experiences
Much discourse, especially within international organizations that have a capacity building
remit, concerns itself with the sharing of implementation experiences. Much is published
on the Global Facilitation Partnership for Transportation and Trade website
(www.gttfp.org). Occasionally, the exchange of experiences also flows over into published
conference proceedings and derived reader-type publications.
37
Articles within the practi-
tioner section of the International Network of Customs Universities (INCU)-sponsored
World Customs Journal also seek to help fill this information gap. However, an often
neglected area is the considerable potential for the joint or collaborative development of
systems and public electronic trade infrastructure. Generic problems and generic solutions
lend themselves to common or shared solutions. With the notable exception of
UNCTADs ASYCUDA customs software, such open source initiatives remain surpris-
ingly rare.
3.3. ADMINISTRATION AND MANAGEMENT
There are a wide range of generic ideas about how the administration and management of
trade procedures can be improved. Many are based on international recommendations but
basically resonate around a handful of key ideas and principles that can be categorized into:
(a) service standards and (b) management principles, including mechanisms to induce
cooperation between stakeholders.
34
World Customs Organization (WCO), The WCO Customs Data Model [Version 2.0] (Brussels: WCO, 2006).
35
For example, LHR would stand for London Heathrow.
36
For example, United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT). supra n. 18.
37
UNECE, supra n. 28.
3.3.1. Service Standards
Ideas here relate to public service provisions, such as commitments to: always publish and
make available relevant rules and procedures; keep the published customs tariff up to date
and make it easily accessible (e.g., online); provide helpline or information centre-type
services; and enable traders to apply for advance binding ruling, such as for a tariff
classification.
38
Commitments to the setting up of fast track appeal mechanism are often a
feature, too. Appeal mechanisms might include so-called departmental reviews (express
rulings by technical experts within the department that are able to overturn decisions made
by officers on the ground) or come in the shape of independent tribunals and specialist
courts. Service standards-type discussions also often extend to time-release measures, the
lengths of queues at inspection facilities, and working hours the latter being particularly
significant where cargo arrives at night and needs to be cleared before the morning.
3.3.2. Management Principles, Including Collaborative Mechanism
There are a range of generic trade facilitation ideas that specifically focus on how trade and
customs procedures should be applied and managed. One guiding principle is that applic-
able rules and procedures should be proportionate to the risk against which they seek to
protect. For example, in view of the low customs tariffs prevailing in most developed
countries, traders often argue that the regulatory burden associated with actually paying
customs duties (or deferring them) is disproportionate. Anecdotal evidence often suggests
that many companies, in response to the perceived bureaucratic burden, actually forfeit
preferential duty treatment or simplified customs procedures.
Another key management principle is the use of risk management techniques.
39
The application of risk management holds that controls and checks should be targeted,
refocusing the control effort on suspicious movements while freeing up the legitimate trade
from regulatory burden. Rather than enforcing blanket controls at set inspection quotas
(e.g., 100%, 50%, or 5% of all traffic), control levels are set in proportion to the perceived
degree of risk. Often risk-based control regimes are tied to official authorizations, confer-
ring privileges to those low-risk operators that have a good compliance record. Privileges
might include access to preferential and fast-track treatment, simplified procedures, or
procedures with fiscal benefits (e.g., customs warehousing, duty deferment, duty drawback,
and similar procedures).
40
Access to such incentives as a reward for virtuous business
behaviour plays a particularly strong theme in recent supply chain security-type pro-
grammes and formal partnership agreements. Examples include the Authorized Economic
38
Sometimes also referred to as a Binding Tariff Information (BTI).
39
For example, A.-M. Geourjon & B. Laporte, Risk Management for Targeting Customs Controls in Develop-
ing Countries: A Risky Venture for Revenue Performance?, Public Administration and Development 25, no. 2 (2005):
105113; D. Widdowson, Managing Risk in the Customs Context, in ed. Wulf & Sokol, supra n. 28, 2005, 9199.
40
Confusingly, some customs officers occasionally refer to these measures as trade facilitations, which is not quite
the same as the concept of trade facilitation (without the s) discussed in this paper.
Operator (AEO) concept or the USAs Customs and Trade Partnership against Terrorism
(CTPAT).
41
Related to the risk management principle is the pareto principle whereby a very small
minority of operators is responsible for the majority of declarations (e.g., postal services,
express carriers, large shipping lines, and freight forwarders). Unfortunately, there is little
published research, but anecdotal evidence suggests that ratios of 5/95 or even 3/97 that is,
3% of the trader population is responsible for 97% of the declarations submitted are not
unusual. Thus, a smart enforcement strategy is to encourage traders with high volumes to
internalize regulatory set control objectives in exchange for additional operational privileges
and low-risk scoring or even the grant of arms-length control arrangement, for example, in
the form of minimal customs interference and a very high degree of operational autonomy.
In addition to formal collaborative arrangements, such as in the area of supply chain
security or authorizations, the use of memoranda of understanding (MoUs) can be an
alternative especially in areas where formalized legislation might be inappropriate or too
time consuming and resource intensive to bring to life. To give one example, it is not
uncommon for MoUs to be drawn up between enforcement agencies and larger operators
or industry associations in campaigns against organized crime. Examples include arrange-
ments for sharing intelligence and providing tip-offs as well as voluntary security
arrangements.
3.4. INSTITUTIONAL MECHANISMS AND TOOLS
Here, the trade facilitation discourse recognizes the diversity of private sector interests and
requirements. Capturing them in order to optimize trade facilitation solutions is seldom
straightforward. Generic tools and institutional mechanisms frequently recommended are
so-called PRO (for PROcedures) committees
42
as well as departmental consultation
vehicles (i.e., operated by a government department enforcing the governing rules and
procedures). Other formal and informal consultation approaches include open consultations
(e.g., published in a public gazette) as well as informal consultation (e.g., in the form of
regular breakfast meetings with key stakeholders). In addition to the gathering of reform
requirements and identifying operational frustrations in practice, such stakeholder engage-
ment also help gain insight into the more detailed facets of operational practices, as well as
ensure that reform activities are pursued in a coordinated manner.
43
One specific tool for agreeing scope for reform is the draft of a Blueprint (or White-
paper) document, which allows government departments and their executive agencies to
agree on a plan about their vision for the future form and shape of the trade environment.
41
US Customs & Border Protection, Securing the Global Supply Chain: Customs-Trade Partnership against Terrorism (C-
TPAT) Strategic Plan (US Customs & Border Protection, 2004); World Customs Organization (WCO), supra n. 6, 2007.
42
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), supra n. 20, 1974;
United Nations Conference on Trade and Development (UNCTAD), supra n. 20.
43
A. Grainger, The Role of the Private Sector in Supporting Border Management Reform, in Border Management
Modernization: A Practical Guide for Reformers (Washington: World Bank, 2010).
Blueprint-type documents also enable private sector stakeholders to contribute valuable
input about operability, costs, and benefits at the earliest possible stage.
44
Trade facilitation-specific assessment tools often play a significant feature in trade
facilitation implementation programmes, too. Examples of assessment tools produced or
commissioned by international organizations include: the UNESCAPs Trade Facilitation
Framework: A Guiding Tool;
45
the trade facilitation toolkits produced by John Raven and
published by the World Bank;
46
and Articles V, VIII, and X GATT self-assessment guide
produced by David Widdowson with the support of the World Bank.
47
Unfortunately,
findings made through use of these tools are seldom placed into the public domain.
The one notable exception are the Diagnostic Trade Integration Studies (DTIS) accessible
via the World Bank website
48
and the Integrated Framework facility.
49
4. EVALUATING THE COMPLIANCE BURDEN
Subsequent to the 1998 WTO ministerial, much of the trade facilitation-specific research
has been focused on economic modelling to highlight the potential gains that can be
derived from reducing trade transaction costs. Much of this early work, though not
exclusively, was produced by international institutions and their employees or consultants.
For instance, the OECD,
50
using a Global Trade Analysis Project (GTAP) database,
calculate that the economic prize of trade facilitation can be quite significant and is worth
up to USD 43 billion worldwide for each 1% reduction in trade-related transaction costs.
Similar calculations emphasizing economic gains were made by John Wilson et al.
51
Using
gravity models, they calculated that, if APEC members who perform below average on
trade facilitation proxy indices were able to improve their performance to half the APEC
average, intra-APEC trade could increase by a staggering USD 254 billion and raise average
gross domestic product (GDP) for the APEC region by 4.3%. Later, they used a similar
methodology but broadened the focus from APEC to a representative mix of seventy-five
countries and calculated that the total gain in trade flow in manufacturing is worth
USD 377 billion.
52
44
For example, HM Revenue and Customs (HMRC), A Blueprint for the Future of Customs in the UK (September
2009) (HM Revenue and Customs).
45
United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), ESCAP Trade
Facilitation Framework: A Guiding Tool (Bangkok: UN, 2004), ST/ESCAP/2327.
46
J. Raven, Trade and Transport Facilitation: A Toolkit for Audit, Analysis and Remedial Action, World Bank
Discussion Paper, 0259-210X; no. 427 (Washington: World Bank, 2001); J. Raven, A Trade and Transport Facilitation
Toolkit: Audit, Analysis and Remedial Action (Washington: World Bank, 2005).
47
D. Widdowson & World Bank, WTO Negotiations on Trade Facilitation Self-assessment Guide. Negotiating
Group on Trade Facilitation (WTO, 12 Apr. 2007), TN/TF/W/143.
48
<http://go.worldbank.org/ULW8UUZUT0>.
49
<www.integratedframework.org/>.
50
51
J.S. Wilson et al., Trade Facilitation and Economic Development: A New Approach to Quantifying the
Impact, World Bank Economic Review 17, no. 3 (2003): 367389.
52
J.S. Wilson et al., Assessing the Potential Benefit of Trade Facilitation: A Global Perspective, Policy Research
Working Papers (World Bank, 2004), WPS 3224.
Reviewing earlier literature and reports on trade facilitation, the OECD
53
estimates
trade transaction costs to lie between 2% and 15% of the value of imported goods. Studies
referenced by the OECD in their review include: United States National Council on
International Trade Development (US-NCITD),
54
Swedish Trade Procedures Council
(SWEPRO),
55
Ernest and Whinney,
56
European Commission,
57
UNCTAD,
58
Ministry
of Economics Trade and Industry (METI),
59
Haralambides and Londono-Kent,
60
and
Japan External Trade Organization (JETRO).
61
Unfortunately, as the OECD concludes,
the data from these studies are not comparable as they vary in methodology, time frames,
country samples, and the variables used to assess trade transaction costs. Focusing more on
the value of time, David Hummels
62
suggests in his model that for manufactured goods
each day saved in travel is worth an average of 0.8% of its value.
Unfortunately, there is very little substantiated research that looks at quantifying trade
transaction costs other than through indirect economic models. Even larger cost-benefit
analyses commissioned by government-sponsored organizations struggle in quantifying
benefits in what is essentially a very complex environment with many different actors
and interests.
63
However, there are a few reports and papers that do provide some
illustrative findings and help shed some insight into the more operational nature of trade
transaction costs. For example, a UN study referred to by OECD
64
reports that over 200
data elements are typically requested in a trade transaction, of which 6070% are re-keyed
at least once while 15% are re-typed up to thirty times. SITPRO (Simplifying International
Trade Procedures; the former UK Trade Facilitation Agency), in an unpublished study,
found that the export of milk powder from the United Kingdom to a North African
country can easily involve as many as twenty-nine different parties and requires twenty-one
different regulatory declarations, official certificates, and transport and insurance docu-
ments, often with multiple copies in different languages.
65
A similar example of complex-
ity, with explicit reference to the potential for a trade facilitation agreement, was also found
53
Organisation for Economic Co-operation and Development (OECD), supra n. 12, 2001, 2003.
54
US-NCITD, Paperwork or Profits in International Trade. United States National Committee on International
Trade Documentation (NCITD, 1971).
55
Swedish Trade Procedures Council (SWEPRO), Data Interchange in International Trade (Stockholm, 1985).
56
Ernst & Whinney, The Cost of Non-Europe: Border Related Controls and Administrative Formalities (European
Commission, EU, 1987).
57
European Commission, COST 306 Final Report, 1998 (1989).
58
United Nations Conference on Trade and Development (UNCTAD), Fact Sheet 5 (Geneva: UN International
Symposium on Trade Efficiency, 1721 Oct. 1994).
59
Ministry of Economics Trade and Industry (METI), Report on Asia-Scale Industrial Structure Policies
(Japanese Ministry of Economics Trade and Industry, METI, 1998).
60
H. Haralambides & P. Londono-Kent, Impediments to Free Trade: The Case of Trucking and NAFTA in the US-
Mexican Border, Mimeo (Rotterdam: Erasmus University, 2002).
61
Japan External Trade Organization (JETRO), Report on Market Access to Japan: Single Windows for Port and
Trade Related Procedures (Tokyo: Japan External Trade Organization, 2002).
62
D. Hummels, Time as a Trade Barrier, GTAP Working Papers, no. 1152 (West Lafayette: Purdue University, 2001).
63
International Trade Data System (ITDS Office), Cost/Benefit Analysis for the International Trade Data System
(Washington: International Trade Data System Office, ITDS, 1998); G. Linington, International Trade Single Window and
Potential Benefits to UK Business (London: SITPRO, 2005).
64
65
For an illustration, see C. Clark, BPAWG Reference Model of the International Supply Chain (2003), TBG 14,
UN/CEFACT. UN/CEFACT/BPA/BP044.
by Andrew Grainger
66
in a study examining the export of beef and poultry from Mercosur
into the EU.
Using the operational lens, direct costs associated with trade compliance occur
immediately when collecting, producing, transmitting, and processing required information
and documents. Additional charges and fees that add to the burden include the expense of
setting up and financing customs bonds and guarantees, laboratory testing and examination
expenses, inspection fees, stamp charges, service fees levied by shipping lines and banks,
labour and handling charges to deliver goods to inspection facilities and to present goods,
storage charges, and possible out-of-hours surcharges.
Further direct costs are also incurred when traders engage the services of third party
intermediaries for a service fee. These include customs brokers (a licensed profession in
many countries), information technology (IT) vendors who offer data management and
declaration services, and freight forwarders and logistics providers who offer documentation
services, customs compliance, and suspensory regimes (e.g., bonded warehousing). By
contrast, indirect costs result from: delay at the border; uncertainty in the environment;
and most of all, the loss of business and opportunities. Typically, these can be associated
with inadequate or contradictory documentation, congestion at inspection facilities, lack of
staff (especially outside normal working hours), and unforeseen emergency measures. They
also include any additional handling, storage, and demurrage charges associated with delay.
5. A COMPLEX ENVIRONMENT
Although trade facilitation seeks to overcome the operational frustrations associated with
trade and customs procedures, much of the current trade facilitation debate seems to be
orientated from the top-down. Its premise starts with prescriptive international recommen-
dations or generic concepts and ideas, as reviewed earlier, about how operational frustrations
can be overcome. However, given that trade facilitation as a topic has been around for quite
some time, a legitimate question worth asking is: why has it taken so long for trade facilitation
to establish itself as a mainstream agenda item; especially as the case for trade facilitation the
desire to cut red tape and reduce wasteful trade compliance cost is self-evident.
The devil, like so often, is in the detail. The difficulties associated with implementing
trade facilitation can probably be best explained in the context of the trade environment. It
is a complex construct, involving many stakeholders (Figure 2). The list of potential proce-
dures can be formidable (Figure 3) and, when examined in detail, considerably larger than
what the World Banks Doing Business Index
67
might suggest. For example, Andrew
Grainger
68
counts more than sixty procedures in the United Kingdom alone. Moreover,
66
A. Grainger, A Case Study Focusing on Trade Procedures as Applicable to the EU Import of Beef and Poultry
Products (Products of Animal Origin), in Trade Sustainability Impact Assessment (SIA) of the Association Agreement under
Negotiation between the European Community and Mercosur: Sector Study for Trade Facilitation, ed. C. George et al. (Brussels:
European Commission, 2009).
67
World Bank, supra n. 9, 2010a.
68
Grainger, supra n. 7, 2007a.
international supply chain arrangements are likely to vary significantly from one operation
to the next. Often the importer or exporter will not know the exact detail of all applicable
operations, let alone their costs.
Figure 2. Stakeholders and Actors in the Trade Environment
Traders
Small, large, importers, exports, experienced, in-experienced, agents (direct or
indirect representaves)
Intermediaries
Transport and related services: Shipping Lines, Non Vessel Owning Common Carrier
(NVOCC), Airlines, Charter Operators, Trucking and Haulage Companies, Railway
Companies, Logiscs Service Providers, Freight Forwarders, Customs Brokers, Banks
and Finance Companies, Insurance Companies
Facilies and infrastructure: Seaports, Airports, Rail-terminals, Inland Container Ports,
Port Operators and Stevedores, Cargo Handlers and Handling Agents, Warehouse
Operators, Transit-shed Operators, IT Service Providers
Government
Revenue and Customs; Transport Ministry; Port Health Authories; Ministry for
Food and Agriculture; Markeng Boards; Trading Standards Bodies; Ministry for
Trade and Industry; Civil Aviaon Authority; Health and Safety Execuve;
Immigraon Services; Finance Ministry; Ministry for Internal Aairs; Quaranne
Inspecon Service; Phytosanitary Inspecon Services; Police; Highway Agency; 3rd
Country Representaves; Contracted inspecon and tesng companies
Figure 3. Regulatory Categories and Examples

Regulatory Category Examples of related acvity
Revenue Collecon Collecon of Customs dues, excise dues and other indirect taxes;
payment of dues and fees; management of bonds and other nancial
securies
Safety and Security Security and an smuggling controls; dangerous goods; vehicle checks;
immigraon and visa formalies; export licences
Environment and Health Phytosanitary, veterinary and hygiene controls; health and safety measures;
CITES controls; ships waste
Consumer Protecon Product tesng; labelling; conformity checks with markeng standards (e.g.
fruit and vegetables)
Trade Policy Administraon of Quota restricons; Agriculture refunds
Moreover, depending on the Incoterms
69
used (e.g., ExWorks, Delivered Duty Paid,
Carriage and Insurance Paid To, etc.), responsibility lies seldom with one party alone.
Compliance costs are likely to be hidden within fixed costs overheads, such as IT and
accounting systems, or fragmented across departments and organizational boundaries.
Although the supply chain management and logistics literature is very familiar with
examining the complexities among interacting firms,
70
with very few exceptions,
71
the
logistics and supply chain management literature has not yet applied itself to the trade
compliance problem at the interface with government executive agencies.
6. OBSTACLES TO BORDER MANAGEMENT REFORM
In view of the overall environmental complexity, obstacles to any trade facilitation initia-
tive, as most practitioners are likely to attest, can be many. They typically revolve around
one or several of the following three issues: conflicting interests among stakeholders, lack of
knowledge, and institutional limitations.
72
Although there is a collective interest in bringing down the cost of trade, improve
efficiency, and increase overall competitiveness, the interests of individual actors are
unlikely to be aligned. Frequently, as can be observed in the exchanges (published and
unpublished) between business and government stakeholders, interests are also conflicting.
Unaligned or conflicting interests tend to be found between: businesses with different types
of operational requirements and capabilities (e.g., small versus large ports or airports versus
seaports); business interests and the interests of individual executive agencies (e.g., between
control and compliance); competing government departments (e.g., Department for Trans-
port versus Customs versus Immigration); competing policy priorities when bidding for
budgets (e.g., transport, customs, health, or education); and between preferences for pro-
tectionists and liberal trade policies. Moreover, it is not uncommon to observe rent-seeking
behaviour and vested interests. One persons simplification can easily become another
persons redundancy.
Institutional limitations can also form significant obstacles to the implementation of
trade facilitation. At their core lies a conflict between day-to-day business operations and
the institutional mechanisms that govern the trade environment. While the former is very
69
ICC, Incoterms 2010: ICC Official Rules for the Interpretation of Trade Terms (Paris: International Chamber of
Commerce, 2010).
70
C.D.J. Waters, Global Logistics: New Directions in Supply Chain Management (London: Kogan Page, 2007).
71
C.M. Jones & M.R. Crum, The U.S. Customs Modernization Act and Informed Compliance Act: Implications
for the Logistics Pipeline, International Journal of Logistics Management 6, no. 2 (1995): 6781; T. Appels & H.S. de
Swielande, Rolling Back the Frontiers: The Customs Clearance Revolution, International Journal of Logistics Management
9, no. 1 (1998): 111118; M.A. Haughton & R. Desmeules, Recent Reforms in Customs Administration, International
Journal of Logistics Management 12, no. 1 (2001): 6582; E. Verwaal & B. Donkers, Firm Size and Export Intensity: Solving
an Empirical Puzzle, Journal of International Business Studies 33, no. 3 (2002): 603613; E. Verwaal & B. Donkers,
Customs-Related Transaction Costs, Firm Size and International Trade Intensity, Small Business Economics 21, no. 3
(2003): 257271; C. Sheu et al., A Voluntary Logistics Security Program and International Supply Chain Partnership,
Supply Chain Management: An International Journal 11, no. 4 (2006): 363374; Grainger, supra n. 15, 2007b.
72
A. Grainger, Customs and Trade Facilitation: From Concepts to Implementation, World Customs Journal 2,
no. 1 (2008a): 1730.
fluid and can change from one transaction to the next, the latter is embedded within the
wider regulatory regime and takes time to amend. Legacy arrangements can be equally
difficult. Changes for example, through the introduction of new control procedures,
amendments to declaration documents, or changes to electronic systems can be costly to
implement and stakeholders need to be convinced that the costs for migration from the
existing status quo are justified. Another example of institutional limitations may be found
in the way governments procure their IT services. Trade facilitation projects like the single
window,
73
which seek to reduce trade transaction by integrating public IT infrastructure,
can potentially stand at odds with preferential supplier agreements put in place by each of
the affected government agencies. For example, customs may have one IT supplier with its
preferred technology and business architecture while the port authority or quarantine
service might contract with other suppliers who base their electronic solutions on different
technologies and business architectures. Institutional difficulties might also be found in the
geographical distance between head office and the borders or ports. As argued in this
article, much of trade facilitation is about fixing operational problems. Those executive
officers with direct operational experience at the borders may not necessarily be the same
individuals who help shape policy in the capitals. Much of the detail required to understand
trade facilitation-type problems can easily go missing.
The lack of knowledge and awareness can be a further significant obstacle to regula-
tory improvements. International supply chains tend to be complex arrangements and vary
from one company to the next. Few individuals in business and policy circles are able to
take an umbrella view and expand analysis beyond the confines of their own organizations.
Precious little research has yet been attempted, which takes a system-wide view of the
operational aspects of the cross-border environment in order to help establish areas for
improvements. Subsequently, policy makers have few places to turn to other than the
international recommendation outlined earlier. While dedicated trade facilitation commit-
tees can be of significant help, their resources are usually very limited. For example,
SITPRO the former UK trade facilitation agency (and probably one of the largest
national trade facilitation bodies) had an annual budget of less than GBP 1 million.
74
7. CONCLUSION
This review has covered considerable ground, including an overview of policy drivers,
definitions, the international efforts shaping the trade facilitation discourse, as well as a
review of key elements and topics that lie within. This article also provides an express
review of current research, which is largely biased towards economic modelling, and
highlights the challenges and obstacles faced by trade facilitation proponents.
73
United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT), supra n. 21, 2004, 37.
74
SITPRO, Report and Accounts for the Year Ended 31 March 2009 (London, SITPRO, 2009), <www.sitpro.org.uk/
about/management/accounts09.pdf>.
At present, as evidenced, for example, in WTO discussions, there is considerable
reliance on international recommendations and generic ideas or topics that are not neces-
sarily grounded in any substantiated operations-focused research. To some extent, one can
also question whether current institutions working in the wider area of trade policy have the
required operational experience and insight. Certainly, one area that raises concern in trade
policy circles is the question of how to enforce any trade facilitation-type commitments. At
present, there is much reliance on emphasizing the unilateral benefits derived from trade
facilitation, such as better utilization of inspection resources, increased business competitive-
ness, and tighter control. Binding commitments of substance, without an institutional frame-
work that is able to independently assess and verify the quality of a nations trade
environment, will be difficult to implement. As we move towards the non-tariff barriers,
the ability to evaluate and assess operational variables is an issue of concern and relevance.
A further question worth addressing is whether current institutions are able to evaluate
and interpret operational frustrations adequately. Moreover, given that business operations
tend to be very fluid and can change from one day to the next, are current institutions
capable and flexible enough to respond to business stakeholders concerns? While many
countries do have dedicated trade facilitation committees, they currently tend to play a very
low-key role with few, if any, direct agenda setting powers. Perhaps, this needs to be
revisited in light of the considerable momentum driving trade facilitation forward.
Irrespective of the above, the absence of any significant operations-focused bottom-
up-type body of research is startling. There certainly appears to be considerable opportunity
for the logistics and supply chain management community to apply themselves to this area.
However, the interdependencies with the technical details surrounding legislatively defined
rules and procedures as well as the technical detail associated with the development of
electronic solutions and setting of standards suggest an interdisciplinary approach.
The diversity of stakeholder interests when seeking to influence optimal solutions and
the form and shape of the governing trade environment further highlights the interdisci-
plinary nature of the subject. As Tom Butterly
75
rightly asserts, trade facilitation is at once a
political, economic, business, administrative, technical, and technological issue. Given the
significant budgets often hundreds of millions allocated to trade facilitation-type
projects (be it in the context of aid-for-trade, customs modernization, national single
window projects, or supply chain security), it certainly is an urgent research agenda that
deserves addressing.
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Editor

Edwin Vermulst
Partner Vermulst, Verhaeghe Graafsma & Bronckers, Brussels, Belgium
Associate Editors Petros C. Mavroidis Edwin B. Parker Professor of Law at Columbia Law School,
New York, Professor of Law at the University of Neuchatel & CEPR
Thomas Cottier Professor of European and International Economic Law, Managing
Director World Trade Institute, University of Berne, Switzerland
Simon Evenett University of St.Gallen
Bernard Hoekman Development Research Group, The World Bank
Junji Nakagawa Professor, University of Tokyo, Tokyo, Japan
Yong-Shik Lee Director and Professorial Fellow, The Law and Development Institute
Faizel Ismail Head of the South African Delegation to the WTO, Geneva
Gary N. Horlick Law Offices of Gary N. Horlick
Henrik Horn Senior Research Fellow, Research Institute of Industrial Economics
(IFN), Stockholm
Pierre Sauv: World Trade Institute, University of Berne
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